Activewear Is Putting in Work at Kohl’s

Sourcing Journal


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Kohl’s is raising its full-year outlook again after the department store saw third-quarter net sales increase 15.5 percent to $4.3 billion on net income of $243 million, or diluted earnings of $1.65 per share, an all-time high. Stock jumped more than 9 percent on news, as both total revenue and earnings per share beat estimates from analysts polled by Refinitiv.

In a Nutshell: Activewear sales “significantly” outpaced overall sales at the business, growing more than 25 percent over last year and more than 20 percent on a two-year basis, said Kohl’s CEO Michelle Gass told Wall Street analysts on an earnings call Thursday. Activewear represented 26 percent of Kohl’s business in the third quarter, bringing the department store closer to its goal to take the category to 30 percent of total sales. Gass said the assortment’s athleisure options and inclusive sizing seemed to resonate with consumers. Men’s sales climbed more than 30 percent over last year, while footwear and accessories jumped more than 20 percent. The children’s category is up by low double digits, driven in part by strong demand for toys. The one business Kohl’s is looking to reignite—women’s, which has undergone a complete brand portfolio reinvention—was most affected by supply chain delays. “Customers are responding very well to our go-forward key brands and metrics such as sell-through, inventory turn and margin are at multi-year highs,” Gass said. “However, receipt delays have impacted the women’s business, disproportionately hindering our ability to drive overall growth to our expectations. We continue to work aggressively to address the situation but acknowledge that supply chain challenges will likely continue to present a headwind.”

Gass referred to extended transit times resulting in inventory receipt delays, alongside skyrocketing transportation costs, as the challenges Kohl’s has faced. Inventory ticked up just 1 percent to $3.64 billion, from $3.61 billion in the year-ago period, but is down 25 percent from 2019. Chief financial officer Jill Timm said that women’s inventory is “notably” down more than this figure, also due to the more than 10 brand exits the company made before the supply chain disruptions worsened. Overall, Gass said the two-year inventory cut was planned, but that levels remain below the initial estimates, and that Kohl’s was going to be heavily chasing to ensure that the business is keeping in line with top apparel trends. Despite inventory bottlenecks, Gass said the retailer was “well positioned for the holiday season, with fresh receipts continuing to flow to support anticipated customer demand.” In-transit inventory was “up quite substantially relative to what we had seen historically…in multiples of where we have seen it,” Timm said. She also indicated that Kohl’s is also packing and holding select non-seasonal apparel to help protect margins.